Consumer Credit Expands Sharply in Q2, Boosting Retail Stocks

Consumer credit levels rose sharply in the second quarter of 2025, offering a boost to global retail sales and stock prices, even as economists warn of rising household debt burdens and potential default risks.

According to the World Credit Insights Report, global consumer credit issuance increased by 8.6% in Q2 compared to the same period last year, led by strong demand in North America, Southeast Asia, and parts of the Middle East. Credit card spending, buy-now-pay-later (BNPL) programs, and unsecured personal loans all contributed to the rise.

Retailers, particularly in the e-commerce and luxury segments, have seen an immediate benefit. Shares of companies such as Amazon, Alibaba, and LVMH have risen 3% to 6% in recent weeks, buoyed by better-than-expected sales and consumer engagement.

“In many markets, consumers are still spending aggressively—even if it means taking on more credit,” said Helena Kostas, senior retail economist at BrightEdge Analytics. “This behavior is lifting retail performance, but it also carries future repayment risks if interest rates stay high.”

In the United States, revolving credit balances reached a new peak of $1.24 trillion in May, driven largely by younger consumers and higher discretionary spending. Meanwhile, delinquency rates are beginning to climb, especially among subprime borrowers.

Central banks are closely monitoring the situation. The Federal Reserve and Bank of England have both issued cautionary statements on unsecured lending trends, while Australia’s central bank has called for tighter controls on BNPL services.

Despite the warnings, retail investors have remained optimistic. The global retail sector index rose 2.4% over the past two weeks, and online spending trends continue to outperform brick-and-mortar locations. Analysts believe upcoming back-to-school and holiday shopping seasons could further boost Q3 retail earnings.

Large retailers are also adjusting their credit partnerships. Walmart announced an expansion of its in-house financing arm to offer flexible payment options for higher-ticket items, while Apple has extended its 0% installment plan to additional countries.

On the downside, rising consumer debt could weigh on growth if labor markets weaken or borrowing costs continue to climb. The average interest rate on credit card balances in the U.S. has now surpassed 21%, the highest level in more than two decades.

Still, for now, the credit-driven spending trend appears to be lifting the retail sector during an otherwise cautious economic climate.